tv American Perspectives CSPAN June 19, 2010 11:00pm-2:00am EDT
that we were promised, had we taken that trillion dollars and applied it to zeroing out any business taxes or zeroing out any income taxes, had we done that for one trillion dollars worth of time, we would have had the most growing economy this economy and we would have had abunddnt in job growth. . .
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on your chair. >> tomorrow morning on "washington journal", james weakley on the merchant marine act of 1920 and its application to the gulf oil spill. then brian fisher man discusses his trip to afghanistan. then the chief counsel and policy director of the judicial crisis that work on wider approach -- are organization is opposed to kagain's nomination to the supreme court.
fcc commissioner talks about reclassifying some broadband services, media ownership, and the use of public airwaves for emergency services monday night on "the communicators." a look at louisiana were the gulf of mexico cleaning efforts continue. we spoke with a coast guard incident commander about communicating with the public. captain, what are you doing here tonight with this event? >> we want to inform the public of how we are doing, how we are fighting the oil spill and providing services to them. i started out doing town meetings and i realize there was a gap. we were not getting the information that we wanted to out to the public. we're not able to get the services and answer questions about claims and what we are actually doing, what is our relationship with bp? the purpose of this town hall approach is to better inform the
public about the oil spill and what we are doing in louisiana. >> how many of these have you had and how they got? >> we have had between five and seven. i intend have of them. i think they are going quite well. we were able to answer folks questions, concerns. a lot had come to ask questions about claims. we have a bp claims people to answer those questions. so, also, we are de-mystifying some of the things we're doing, like the use of dispeesants and how the fish are being impacted. and what kind of sampling we are doing very . >> walk us through a typical day. >> are reported the incident command post at 6:00 in the
morning. i get a briefing of the activities that went on through the night, which is usually surveillance. we get a good handle on what the picture of the oil looks like at that time. we strategizing about how we will fight the oil for the day. we start moving resources to where that is part of the oil is. about 7:00, we brief the unified area command which is up in roberts about our activities, let them know. after 7:00, between 7:00 38:00, i am involved in a called with governor jindal. from 8:30 on, it is doing these town hall meetings, doing press interviews, but most of my time is involved in making sure we are in the fight into doing the right things for the fight. i do get out. i fly around as the tactical commander, make sure the resources are commissioned in the right part of the oil and to
handle logistical issues or concerns we need to address in the field. >> how does a person learned to do all this? >> 20 years of experience. my first oil spill was the exxon valdez. i came in the coast guard as an ensign back in 1987. that has been my profession ever since then is oral spill response. >> i spoke to some fishermen in venice yesterday who are worried that their way of life will come to an end. what do you say to people? >> we are fighting for their way of life. i say to them that they will fish again. that is my promise to them, and i will do that until the day i finished this oil spill and every last drop of oil is off the beach so we can get them back to fishing again. we will get them back to fishing again. that is my promise. >> thank you very much. >> thank you. >> there is something i wanted
to share with you that i still keep with me. hold that thought. this is a piece of paper from the comfort inn. when i came here for katrina, i was one of the lucky ones that got a motel room. as i was checking in at night, i was checking in and a man came in to the hotel with his wife and his wife was holding his hand, and he was carrying into the motel -- carried into the hotel. he was barely able to stand because he was working so hard. i said, sir, you can have my room. he gave me the snow. is note. thank you. if i can ever be of help, please call. this is a reminder of what this battle is all about. it is about your way of life.
i hope tonight you have learned what the coast guard is trying to do to take care of this response. i was brought in here by admiral allen. i am in charge. i am here to fight for your way of life. so thank you. please see me talk to me. i would love to hear what you have to say. --please come talk to me. please walk around and find out what you need. but thank you very much. [applause] >> -- legislation on a variety
of issues, including the extension of unemployment benefits, tax credits for first- time home buyers and nominations for federal positions. he is followed by the mississippi senator with the republican address you talked about the president's response to the gulf of mexico oil spill and the energy proposals he outlined in his oval office address earlier this week. >> at this moment, our nation is facing a host of big and difficult challenges. and more than anything else, what's required to meet those challenges right now is a sense of cooperation and common purpose among our leaders. what we need is a willingness in washington to put the public's interests first - a willingness to score fewer political points so that we can start solving more problems. that's why i was disappointed this week to see a dreary and familiar politics get in the way of our ability to move forward on a series of critical issues that have a direct impact on people's lives. in the united states senate, we have legislation that would boost our economic recovery and
help americans who've been affected by the worst recession in generations. we've certainly made progress since we were losing 750,000 jobs per month around the time i took office. our economy is growing again, and we've added jobs for five straight months. but there are still millions of americans out of work, and millions more who are struggling to pay the bills. the legislation in the senate right now would extend unemployment benefits to those workers who lost their job through no fault of their own. it would provide relief to struggling states that would help save the jobs of thousands of teachers and cops and firefighters. there are also provisions in this legislation that would extend the tax credit for first-time homebuyers, as well as tax cuts to keep research and development jobs here in the united states. unfortunately, the republican leadership in the senate won't even allow this legislation to come up for a vote. and if this obstruction continues, unemployed americans will see their benefits stop. teachers and firefighters will lose their jobs.
families will pay more for their first home. all we ask for is a simple up or down vote. that's what the american people deserve. just like they deserve an up or would hold oil companies accountable for the disasters they cause a vote that is also being blocked by the republican leadership in the senate. right now, the law places a $75 million cap on the amount oil companies must pay to families and small businesses who suffer economic losses as a result of a spill like the one we're witnessing in the gulf coast. we should remove that cap. but the republican leadership won't even allow a debate or a vote. and as we speak today, 136 men and women who i've nominated for key positions in the federal government are awaiting a vote on the floor of the senate. all are highly qualified. very few are controversial. the vast majority already have support from both parties. but most of them are seeing their nominations intentionally delayed by republican leaders,
or even blocked altogether. they cannot get a vote. what this means is that, at a moment when our country is facing so many challenges a time when we need all hands on deck we cannot get the qualified people we need to start the jobs they were appointed to do. look, the nature of our democracy is that we'll always have disagreements and debates -- even heated ones. that's healthy and it's important. but let's argue over genuine differences over ideas and policies. and let's go into those debates with an open mind a willingness to find common ground and a conviction that, in the end, one way or another, we will have a vote to decide them. next week, i'll be meeting with a bipartisan group of senators to discuss how we can transition away from our dependence on fossil fuels and embrace a clean energy future. i don't expect that we'll agree on a solution right away. in fact, i know that there will be plenty of disagreement and different ideas. but at least it shows that republicans and democrats can
still sit down together in an attempt to tackle the big challenges facing our nation. i know the political season is upon us in washington. but gridlock as a political strategy is destructive to the country. whether we are democrats or republicans, we've got an obligation that goes beyond caring about the next election. we have an obligation to care for the next generation. so i hope that when congress returns next week, they do so with a greater spirit of compromise and cooperation. america will be watching. thanks. >> hello. i am senator roger wicker. as we enter the third month of horizonaeepwater disaster, we hear about proposals from the obama administration that will do more harm than good. from the oval office tuesday night, the president attempted
to recover from a widespread perception that he has not made this crisis a party. the public outcry about the president's in attention has been loud and bipartisan. i am glad president obama is finally putting this catastrophe at the top of his agenda, but his response has been too slow. he was a slow and listening to state and local leaders, slow in getting skimmers to the gulf, slow and understanding the seriousness of this crisis. many of his actions have taken us in the wrong direction. earlier this week, the president came to the gulf coast. after visiting with him in mississippi, i was optimistic he was removing politics from this disaster and focusing solely on fixing the problem. republicans in congress and at the state level looked forward to participating in a bipartisan, and on political solution to the many challenges of this disaster has brought.
unfortunately, we were disappointed. in less than a day, we were reminded of rahm emanuel's theory of never letting the good crisis go to waste. in his speech, president obama made it clear that he intends to exploit this crisis to push his liberal agenda for our cap and tax scheme. this is a disservice not only to the victims and their families but also to the millions of gulf coast residents who are struggling in the wake of this bill. americans increasingly reject the cap and tax proposals because it would drive up he costs of energy enforce american jobs overseas. the president spent more than 1/3 of his address advocating this national energy tax, revealing his true priorities. now is not the time to push controversial, job-killing, partisan agendas through congress. this proposal will do nothing to fix the leak or clean up our beaches, marshes, and waters.
another idea that takes us in the wrong direction is the plan to increase cleanup fees and raise those funds to pay for unrelated programs. these funds are needed to clean up spills, not to satisfy nancy increasedesire to to spending. if left in place, the moratorium would permanently eliminate thousands of jobs and drive up the cost of energy for all americans. you do not have to take my word for it. earlier this week, democratic strategist james carville said the moratorium was wrecking the economy of the gulf coast. along with this bill posey devastation to our fisheries and the administration's decision to halt drilling, one of the greatest threats to the gulf coast is the loss of tourism.
our hotels and restaurants have seen business decrease by as much as 70%. at a press conference on monday, the president pointed out that there are a lot of beaches that are not affected and will not be affected. i was hoping the president would make this important point to the larger audience tuesday night, but since he did not, i will say it again. the vast majority of gulf coast beaches are clear, beautiful, and safe. bp's ceo recently said he wanted his life back in and later quickly apologized. bp put dollars before safety, and we are all paying the price. we have been told that bp will be held accountable and pay all damages. but we in the gulf states really need is to have our way of life back. we want i were jobs back, our economy back. and we need our tourist back. so please come and visit us. you deserve a vacation.
and we could use the business. thank you. >> both the house and the senate are in session next week. the senate returns monday at 2:00 p.m. eastern for general speeches appeared in votes on nominations begin at 6:00 p.m. later, work on a bill that extends tax breaks and jobless benefits. it could make its way to the floor once again. also work on a house-passed bill that would create $30 billion fund and to help small businesses get credit. follow the senate live on c- span2. the house returns tuesday at 12:30 p.m. eastern. we expect a debate on several bills at 6:30. later in the week, possible consideration of a measure aimed at rolling back the supreme court's 5-4 decision in the
citizens united curses the election committee earlier this year. also expected, work on the 2010 spending bill aimed largely at funding military operations in iraq and afghanistan. the house is live on c-span. at our schedule. coming up next, a hearing on the proposed merger between united and continental airlines. legal experts look at the wall between congress and the supreme court. later, defense secretary robert gates and admiral mike mullen testified on next year's defense department budget. sunday on "newsmakers", senate judiciary committee chairman patrick leahy on the upcoming confirmation hearing for supreme court nominee elena kagan.
"newsmakers", sunday at 10:00 a.m. and 6:00 p.m. eastern on c- span. supreme court justice clarence thomas on the prospect of a new justice. >> you are bringing in a family member and it changes the whole family. it is a different today than what it was when i first got in. and i have to admit, you grow very fond of the accord that you spend a long time on. >> with the confirmation hearings for elena kagan starting june 28, learn more about the supreme court in this new book. providing unique insight about the court. available in hardcover and also as an e-book. >> a look at the proposed merger between united and continental airlines. lawmakers heard testimony from
airline executives and a labor union representatives. if approved by the justice department, it would create the world's largest carrier. held by the house transportation subcommittee, this is 3.5 hours. [gavel opounds] >> the chair will ask that everyone turned electronic devices off or on vibrate. we are meeting today to receive testimony regarding a proposed united-continental merger and the possible effects of consumers and the industry. i intend to give a very brief opening statement and put the rest of my statement in the record. then i will call on mr. petry for his opening statement and then we will go immediately to our first members panel. i welcome everyone today to the aviation subcommittee hearing on
the proposed merger between united airlines and continental airlines and its potential effects for consumers and the industry. in particular, i want to welcome the families of flight 3407 for being with us today and for the support to improve pilot training and safety in the industry. given that we have several panels today, and i think a total of 18 witnesses, as i said i will be brief with my statements and asked mr. petry to do the same period last month, united and continental announced that they would merge to form an airline debt by several measures would be the largest airline in the world. united and continental claim that the proposed merger will generate $1.20 billion in annual revenue and create cost synergies for more effective aircraft utilization, more comprehensive route networks, and improved operation efficiencies. in 2008, this subcommittee held
a hearing on the merger of delta airlines and northwest. at that time camera there was speculation that other carriers within the industry would merge to create a u.s. airline industry dominated by a few mega-carriers. two years later, we are meeting again today to discuss another proposed combination that would surpass the delta as the world's largest airline. this merger would leave our u.s. industry with only four legacy airlines. we have a shared interest in maintaining a safe, reliable, profitable air transportation system. we must ask critical questions on the long-term implications of continued mergers for the future of the industry. i am very concerned about how this merger, if approved, will affect ticket prices, how the merger will affect pilots, flight attendants, mechanics, and employees of both airlines. how many employees will lose their jobs are receive reduced benefits and wages and what will
happen with existing union contracts. less competition it generally leads to higher prices and a loss of jobs. i sympathize with the thousands of airline employees who have suffered as a result of airline financial problems in the past. many have seen their hard earned pensions dropped during airline bankruptcies, seniority rights disappear, labor disputes go unresolved, which is cut it, and jobs lost to outsourcing and consolidation. this merger should not take place at the expense of consumers or workers who have already made tremendous sacrifices. past mergers have not always demonstrated that consumers and employees will be better served by consolidation. therefore, what i want to learn from this hearing is how is this proposed merger different from past mergers? and how will this merger really affect consumers and employees? currently, both the department of justice and transportation are in the process of reviewing
the merger. i understand united and continental are hopeful a decision will be made by the end of the year. although we do not have a government panel testifying today, i trust the appropriate federal agencies will make certain that this proposed merger receives of their review and insure that it is consistent with the requirements of the law. i am interested in hearing from the analysts on our second panel regarding the pros and cons of whether low-, and cost carriers will be able to keep tfairfares down. before recognize mr. petry, i ask unanimous consent to allow to be weeks for all members to provide additional materials and statements. without objection, so ordered. additionally, the department of justice has prepared a letter explaining its antitrust review process. the letter does not deal with
this specific merger, but it may be helpful to members of the subcommittee in understanding the process. we received letters from organizations concerning this specific merger. and i will ask unanimous consent of these letters be placed in the record. without objection, so order. the chair recognizes mr. petry. >> since 2001, the airline industry has lost ove 150,000 jobs in seen over 35 bankruptcies. airlines must cut costs and increase efficiency or face closing their doors. over the past decade, the
commercial aviation industry has faced a variety of challenges, including terrorist attacks, rising fuel prices, and a decline in demand due to the global recession. unprecedented events such as plumand the volcanic ash e is added to the industry's woes. u.s. carriers must compete in the world marketplace against financially strong competitors. we cannot deny the airline industry is a global industry. decisions to emerge over the last few years have been driven by the need to improve u.s. carrier's ability to compete on a global basis. last month, united in continental airlines announced their intention to merge. global competition, the struggling economy and the need to improve efficiency are cited as the main reasons for this. since the proposed merger was
announced, aviation experts, labor groups, consumer advocates and others have commented both for and against airline mergers in general and the united- continental merger specifically. the proposed merger's impact on consumers and competition in the marketplace, air service, air fares and a combined 89,000 employees has been the subject of a great deal of speculation. today, we have before as representatives of the interested groups to testify about airline consolidations, focusing on united-continental. we will also hear from the chief executive officers of both airlines. it is important that the aviation subcommittee hear from the interested parties to gain a better understanding of the proposed merger of united and continental. procedurally, the merger cannot be completed without approval from the antitrust division of the department of justice. their review, currently under way for the proposed merger, is
a grueling and a thorough process ensures the proposal will not have negative consequences on competition. in interest of fairness, i urge the department to continue the tradition of objectivity as they conduct their antitrust analysis. i look forward to hearing from all of our witnesses. before i yield back the balance of my time, i would ask that letters of support from various interests be included. >> without objection. chair thanks the ranking member for his opening statement. we now recognize our first panel of colleagues. the honorable luiz guitierrez, donald payne, representing the 10th district of new jersey, and congressman dennis kucinich, represents the 10th district of ohio. gentlemen, your full statement will appear in the record. the chair now recognizes
congressman gutierrez. >> thank you. thank you for inviting me to speak before the committee on the proposed merger. while this merger hasn't generally been greeted with enthusiasm, i believe we should not overlook the potential serious impact it could have on consumers and the employees. for consumers, the issues of airline fees, which we all know covers just about everything except the air you breathe on board those airplanes, requires further scrutiny. in 2009, united and continental airlines made $523 million in baggage fees alone. recently, united announced that its passenger unit revenue was up 25% from a year ago. given this a good news for united, i believe is a good time to review the fairness and
necessity of excessive fees. the airline industry reported $1.2 billion in one year in extra fees last year. they are almost out of whack as the credit card industry is. i want to ensure that low -- loyal customers of frequent flier programs have easy access to their rewards without being misled. after receiving complaints from residents, i began to look at the fine print on these highly promoted programs, which are a significant source of revenue for the airlines. unfortunately, i find a lechler liability, honesty, and -- a honestyeliability, and integrity. they can charge a fee, change the terms and eliminate the program at will. congress must stand up for consumers and protect their interests in the frequent flier program. i am deeply concerned with the impact of this merger will have
on united and continental employees. to keep these airlines in business, workers have made serious concessions and their requests deserve consideration. last week, i met with united and continental employees in chicago. i heard from a united airlines flight attendant. she shared with me the following -- "today i am at work. my savings account is depleted. i am forced to sell my town hall. i cannot afford the health care ddeductible. my family has suffered so united airlines can succeed. executives reward themselves with millions of dollars every year that we have struggled for." i also heard from a union shop foreman, a 40-year united airlines employee. he shared, "in the past two years, as so many airlines have cut wages and benefits, they realized they could save money
by cutting maintenance jobs in contrasting out critical aircraft service to the lowest bidder. i am not talking about changing alike all. i am talking about critical work that is not held to the highest standard -- it puts you and your family at risk." "from an industry perspective, perhaps the greatest concern for pilots is the continue outsourcing of their jobs. nearly half the passengers of the united states are now our carried by subcontract airlines. the subcontractors are in a continual churn to sell their services to the major airlines at the lowest possible cost, of violating safety guidelines." i think united and continental have said far too little about how this merger will actually affect their front-line employees. we do know, however, and this is something that causes me great consternation, members of the
committee, we do know, however, that the merger may affect a few employees, like the chief marketing and financial operations officer for continental airlines. they stand to receive a severance package totaling $27 million if they choose not to move to chicago and joined the new united. put this in perspective, $27 million would be at 10% pay raise for each of united flight attendants and it would be well- deserved. before we give a stamp of approval, i strongly believe united and continental need to bring their employees to the table and consider their request. these airlines need to make a commitment to reduce ancillary fees and better protect their loyal customers. thank you for allowing me to speak and end by saying, we cannot stand up for the consumers. we can stand up for the 40,000 employees at united and continental.
they deserve us to stand up for them today. -- we cannot stand up for the consumer. >> thank you to my friend from illinois for his thoughtful testimony, and now recognizes the gentleman from new jersey. >> thank you very much, mr. chairman. thank you for this opportunity for me to testify, and also, it is great to be with my colleague. and generally we are on the same page. i think this page by be a little tilted in the other direction at this time. however, we are certainly here today to discuss the proposed merger. continental airlines is the largest employer in my city of newark. i am here today to offer my support for this proposed merger. as a general policy, though, i am generally concerned about
mergers, because, in instances it does mean significant reductions in jobs, stifling competition, and some of the other situations that we heard the previous speaker talked about. however, this airline merger is different, in my opinion. these two new airlines have a very complementary routes, with very little overlap. when there is very little overlap, there is no need for significant reduction of employees. this is a fact that continental's ceo has confirmed to me and other members of the new jersey delegation. i know that continental has lost $1 billion since the 9/11 attacks. i know the employees have lost jobs and have been forced to accept wage reductions and made other sacrifices during this time. this is not good for the many continental employees who live in my district. however, the airline industry
has also struggled with the high price of oil and with the impact of the 2008 recession. i have met with continental's ceo to discuss this merger. and it has been made clear to me and members of the delegation that without the merger, continental cannot be assured of a long and prosperous future. they may be able to earn a modest profit for some years, but that is not a formula for long-term success if they are losing money in the other years. continental seems determined to try to turn their fortunes around through this merger. i have talked with jeff, and we expect continental to bring in a more favorable labor, management culture to the new airline. as i have encouraged them to complete the necessary collective bargaining
agreements early in the process. i trust that he will conduct those negotiations with all the unions, with the dignity and respect. the unions will be critical to the long-term success of this merger. employees' wages, retirement security, and health benefits must be a top priority for the new combined carrier. it is comforting to know that continental has fully respected the decisions of their employees to organize. although it was a hard-fought battle, in february, 2010, continental's ramp workers made history when ballots were counted and the results showed that an overwhelming majority of the workers of voted to join the teamsters union. this was a strong testament to the fact that fleet service workers at continental are working to help create an environment that will sustain positive relationships between continental and its workers who choose to unionize. i believe this merger is good
for my city of new work and for new jersey because it will allow for new joke -- the jobs and growth of services. continental is a premier domestic and international gateway -- newark is a premier domestic and international gateway. the international airport has been one of the fastest-growing airports during the past two decades thanks to continental. the city and the state of new jersey have benefited from the airlines presence. over the years, continental has not only made infrastructure investments at the airport, but the airlines leadership has successfully worked with local government to establish a job creation programs and promote other important growth initiatives in the state. just this summer, there are nearly 75 young people benefiting from a summer internship program that allows them to learn valuable customer service skills as they spend
each day working the crowds at the ticket counter. i have a long history of supporting continental, because they have a long history of supporting and northern new jersey. newark is on the verge of a renaissance in continental is one of the reasons for that. they have opened new routes to south america, europe, china, and japan. while i have served in congress, the additional new routes have any as to the airport. we have increased use of our airport by business and leisure passengers. more importantly, we have increased jobs, jobs that come with good benefits for part-time and full-time employees. as a member of congress and a member of the house foreign relations committee, i travel the world and have to carry out my responsibility. i see the other global carriers that continental must compete with. as much as continental has
changed and grown in the last decade, they need to be bigger if they are going to compete with british airways, iberia, and klm combined with air france. i realize the chairman and some of my colleagues may not agree about the benefits of this merger, but from my vantage point, given the current challenge of the economic landscape, the proposed merger between continental and united is the best way to ensure sustainability for the airline industry it for jobs in our region and to compete with the world carriers. with that, mr. chairman, i appreciate the opportunity to testify before this subcommittee. >> the chair thanks our colleague and friend from new jersey. we now recognize the gentleman from ohio, mr. dennis kucinich. >> thank you very much, members of the subcommittee. thank you for this invitation to
testify on a proposed merger of united airlines and continental. in hindsight, it is easy to see the merger is a culmination of continental's efforts over the past to it were yeatwo years. a year ago, it was insisting that it did not need to merge. it was pursuing antitrust immunity to join united and 20 other airlines in the star -- over the objections of the department of justice, continental received antitrust immunity and now is engaged in flight co-sharing and frequent- flier plans and under the joint venture, can even share revenues. now continental and united -- say last year was not necessary.
in addition, to sit again antitrust concerns which i will briefly outline here, there is the possibility that continental may not have been completely forthright. -- with congress and regulators with respect to its marketing and joint ventures last year or the proposed merger before us today. yesterday i sent a document request directly relevant to see the begin concerns produced by the inquiry and discussed below regarding the legality of the proposed merger under section 7 of the clayton act. the mergers advisability as a matter of policy and the veracity of continental and united representations regarding the purposes and the likely effects of the merger. when continental pursues antitrust immunity, key
stakeholders concluded that the alliance was in lieu of a full- blown merger. jon cornyn stated last month that continental officials informed him that the alliance and a joint venture was an attractive alternative to continental merging with united. continental explained to the senator that a merger was not in the best interests of shareholders, employees, or the communities continental serbs. antitrust immunity for the alliance of joint venture would provide much of the benefit of the merger of without the labor integration and financial risk. now, senator cornyn and others wrote the department of transportation supporting the antitrust immunity on the grounds it was preferable to a full-scale merger between continental and united that could lead to a slight reduction and job losses. one year later, after receiving
government support, continental is now pursuing a merger. it is continental's change in business strategy a coincidence? i find it hard to believe. i is more likely this was their plan all along. their willingness -- it is more likely that this was their plan all along. continental and united have stated they have no present plans to reduce services or close hubs, but plan to moderately decrease overhead costs and gain $900 of gains by rerouting. not surprisingly, continental does not list cutting flights or raising fares as a means to revenue growth. market observers, including some who support the merger, take a
different view. they doubt the magnitude of the merger's deficiencies. -- efficiencies. moreover, analysts point out that the costs and revenues synergies, airline revenues have almost never materialized. despite the ability of low-cost and regional carriers to enter markets exited by merging airlines, service cuts, most analysts flatly predict that cleveland would lose its hub. perhaps more troubling is the way industry analysts believe in the united may increase its profitability by eliminating up to 10% of its post-merger
capacity and raise fares. according to many supporters, the industry's tens of billions of dollars of losses since deregulation are largely a product of destructive competition that has led to overcapacity, artificially low prices. the new united into the industry would profit from the decrease the number of market participants in efforts to raise fares. well sustained profitability for to the domestic airline industry is important, i do not believe that destructive competition is because of that industry's bill the remedy mayfear be worse than the disease. revenue gains based on these practices are not merger related deficiencies under the law. if any efficiency gains do not materialize, it is possible they will be realized through the star alliance and the a plus plus joint venture.
they should carefully analyze this. in additioonn, there are number of of the possibilities for anti-competitive behavior, such as the merger of american airlines and u.s. air why is that is predicted to take place if united and continental merge. finally, the size of the united could raise the prospect of systemic importance and risk to the economy. even if the united is not officially considered too big to fail, it would be big enough to exert increased power over regulators. if the financial crisis has taught us anything, it is the difficulty in predicting ex-ante
iad of ways companies can work to the detriment of their customers. this will involve the development of competition policy based not simply on the case before us but on consideration of the overall state of competition in the industries we are reviewing. -- including consideration of market trends and dynamics and not lose sight of the broader impact of antitrust enforcement. it would be important for this subcommittee to hold the administration to that promise. traditional antitrust enforcement would examine the danger of competition and would be -- which would be reduced by cities that have been served by these incumbent airlines. doj should consider whether the united will exercise market power to the detriment of
consumers. i really thank the chair for his indulgence and members of the committee for the opportunity to testify. thank you. >> of the chair and members of the subcommittee thank you for your testimony. gentlemen, we thank all of you for taking time out of your busy schedule to offer testimony this morning. with that, we recognize there are a number of other hearings going on with other committees and a lot of respect for your schedule at a time commitment, we thank you and would ask that the next panel come forward to offer their testimony. thank you again. >> thank you. >> the next panel will consist of both of the ceo's of united
airlines and continental, mr. glenn f. tilton, of united airlines. and mr. jeffery smizek, the chairman and ceo of continental airlines. we appreciate your coming before the subcommittee today to offer testimony. as you know, your entire statement will appear in the record. we would ask you to summarize your statements in approximately five minutes. and then it will get the opportunity for myself and other members of the subcommittee to ask questions and to follow up. with that, the chair now recognizes mr. tilton. >> good morning, chairman costello, ranking member petri, and members of the committee. let me start by simply saying
that the status quo for our industry is clearly unacceptable. it is extraordinary and insightful that this industry has lost some $60 billion and 150,000 jobs in the united states in the last 10 years. delivering the worst financial performance of any major industry, along with 186 bankruptcy's over the last 30 years. both before and after deregulation, this industry has been systemically incapable of earning even a modest profit, let alone all reasonable return on large investments we have made in aircraft, facilities, and technology. it is ironic that this industry,
unable to cover its cost of borrowing, is expected to be and indeed must be a key enablers of the countries pose economic recovery. economic recovery. you know the critical role that our industry plays in the communities you represent. creating commerce, tourism, jobs, and contributing to the overall economy. personals of one's perspective, we can likely agree serial bankruptcy's and the asset distribution of failed companies cannot be an acceptable industries strategy. we must create economics to see sustainability to business
cycles. we have been consistent to put our company on a path to sustained profitability. without profitability, we cannot provide a stable environment for the employees that mr. gutierrez mentioned. we cannot maintain its service to communities large or small or invest in customer service, nor can we create value for our shareholders. to be profitable, we must successfully compete in the global market of today, a very different market than the market of 10 years ago or, indeed, the market of 30 years ago. today, low-cost carriers are very well established across the united states. and southwest airlines, will continue to be our country posey largest domestic airline in terms of numbers of passengers
carried after the united- continental merger. today, in the marketplace of today, international competitors have merged and powerful new entrants continued to gain ground across the globe. largesthe world's airlines measured by revenue are air francefthansa, and klm. with more than 2/3 of trans- pacific capacity provided by foreign chararriers. united and continental have taken significant actions to improve our performance, competing across both international and domestic markets and at the same time finding a way to connect small u.s. communities into our combined networks. in this dynamic, a highly
competitive and are met, these actions have not been enough. our proposed merger is a very logical and essential next step toward our objective of sustained profitability. let me be very clear. without this merger, we would not have the $1 billion in synergies to improve products. and to improve service for our customers, nor would we have the financial means to create better career opportunities for our employees. we would not be as a successful competitor as we need to be to enable economic development across the country. a merger enhances and strengthens service for those who rely on our network in nearly 148 small communities and metropolitan areas, providing business lifelines and economic benefit to those communities that they otherwise would not have. carriers compete vigorously on
both price and service. our merger will not in any way change that reality. there is significant low-cost carrier competition at every single one of our hbusubs, including a 15 nonstop routes in which we overlap. of the last decade, ticket prices across the united states have declined by 30%. adjusted for inflation, fares to small communities have also declined. are expected revenue synergies are derived from a better service and an expanded network. they are not based on fare increases. this represents excellent value and more destinations for consumers across the country. consumers will benefit from intense price competition across the industry due to the prevalence today of low-cost
carriers, other network carriers, and their transparency. the competitive landscape has changed. to be accompanied -- it provides a value for customers, shareholders, and employees. and are to build companies also have to change. to create a leading global airline with a platform for a healthy company, a profitable company, that can compete in the realities of today's global marketplace, provide job opportunities, and provide a vital connectivity for the many customers in communities that together we surf. thank you very much, mr. chairman. >> thank you. >> good morning. i want to thank the chairman, ranking member, and the members of this committee for the opportunity to be here today. i want to make four points. this is good for employees, communities, consumers, and
competition. let me start with employees. the volatility and instability of the airline industry have had harsh effects on employment. before 9/11, continental had over 54,000 employees. today, despite being the only network carrier to have grown since 9/11, we have less than 41,000 employees, and we have lost over $1 billion. before 9/11, united had over 100,000 employees. today it has about 46,000. after we march, our employees will be part of a larger, financially stronger -- after we merge, our employees will be part of a larger, financially stronger company. we will be able to compete in the global marketplace and better able to withstand the global -- external global shot that hit our industry with regularity. because of how little we overlap, the merger will have
effect on the jobs of our front-line employees. we are committed to integrating our work forces and a fair and equitable manner, negotiating contracts with our unions that are fair to the employees and to the company. united has two union board members and those board seats will continue after this merger. . .
>> including 148 small communities. the merger will be good for consumers as well. the combined airline will offer consumers with unparalleled networks in the frequent-flier program. it will have the financial wherewithal to invest in technology, acquire new aircraft and invest in new people and its product. we will have a young and fuel- efficient fleet and our new aircraft orders will permit us to retire our older aircraft. continental brings its culture of dignity, respect and direct open and honest communication. this culture causes an environment where employees enjoy coming to work every day and give it great customer service. united brings to the merger talented employees that have
industry leading on-time performance. the merger will also enhance competition. continental and united have complementary route networks. our networks are so complementary that we only have a minimal number of the overlaps that face significant competition after the merger. over 85% of our nonstop u.s. passengers have a direct low- cost alternative. low cost carriers compete at all of our hubs and that air power base -- at airports adjacent to our hubs. we also face significant competition from foreign carriers, which themselves have merged. it includes the lufthansa co. and british airways. it will enable us to compete effectively against these large
foreign carriers. in sum, it will create a strong, financially viable airline that will provide good paying careers and great customer service in an unparalleled network to consumers and reliable service to communities. the merger will provide us with a platform with sustained profitability and position us to succeed in the highly competitive domestic and global aviation industry, better positioned than either of us could be alone or together in an alliance. thank you very much. >> let me start with a few questions. in my opening statement, i expressed my concern and you have heard from the members that testified here before us today and i think that every member of the subcommittee is concerned about the employees at both airlines and what happens to them. we know what has happened in
past mergers and we heard your testimony that there will be minimal affect on the employees and mr. tilton testimony -- testified that it will come from military programs. can you make a commitment to the subcommittee that, in fact, the combined work forces if the merger goes through that there will but the layoffs and that people will not lose their jobs as a result of the merger? >> i can speak to the affect of the merger, despite all the external shocks that this industry has experienced will have resulted in the number that jeff shared with you. the decline in employment, this
merger will not have a negative effect on our level of front- line informant. in fact, it should give us the opportunity to grow front line employment for the growth of the two companies themselves. >> mr. spies a? >> he is correct. in any merger, there is only one ceo and there is only one cfo and there is only one general counsel, etc.. there will be reductions in headquarters jobs as there would be in any merger, but the vast majority of jobs are front line jobs and because we are complementary, we do not expect any significant unemployment. >> in the delta-northwest merger in 2008, they indicated that the pilot union had reached an agreement.
is there a reason why this was not done in this proposed merger? >> let me speak to that, if i could. >> could you pull the microphone closer to you? >> this merger came together very quickly. we learned that united airlines was in negotiations to merge with another carrier. we needed to move swiftly and we did so over a three week period. that process for researching -- for reaching agreements could not move swiftly. we are in the process, and you will be hearing from our pilots in the next panel. we are in the process of working together with the pilots union and we hope to reach a joint
agreement. it is my strong desire to reach an agreement as promptly as possible. >> it is my understanding that both united and continental formed a special committee to discuss potential merger issues in 2000 eighth. you just indicated that there was not enough time, that this came about quickly. if they formed a committee in 2008 and this proposed merger comes to years later, -- came to ban years later, can you explain that? >> -- came to them years later, can you explain that? >> -- came years later, can you explain that? >> during that period of time,
we did not have any further conversations relative to a merger with continental. as jeff appropriately says, we were having a discussion with another company and our pilots union had a very distinct point of view about the difficulties associated with that transaction and they were focused on the issues associated with that transaction rather than this one. it is a reasonable thing to have happened. let me be very clear. they also made it clear that they prefer this transaction rather than that one. we were not preparing for that, mr. chairman. >> some united retirees and other stakeholders have made note of the fact that both of you have indicated that the merger would generate 1.2 billion in synergies. sense united shed its
obligation to employee pensions, they are wondering if, with this merger, if it takes place, is there any hope that employee pensions might be restored? they want to know how they are affected. >> you may recall that the action taken relative to the defined benefit plans was taken by the plan itself. that was at their discretion. along with the decision to guarantee the defined benefit plan, it was a condition at united not be restored. we replaced those pensions with contribution plans. they have slightly different retirement plans and work hard together to make sure that it is
the best that can be. the short answer to those that lost their pensions with the bankruptcy, how will they be affected? >> that would be unchanged. it will not affect the retirement plans for current retirees. >> so they should not hold out hope that they would see a reversal? >> i do not foresee a reversal. . >> powerful committee often eloquently says of the number one job of our committee is to insure that safety is observed. as the chairman pointed out, the flight from newark to buffalo, we talked about losses in 2001
and it puts a lot of pressure on the whole system. we have been fortunate that we have the most remarkable safety record overall and i know that you are committed to maintaining that, but it has to be hard and it puts a lot of pressure on front line employees as we saw with the crew and the difficulties that they had to offer -- that they have to work under. i just wonder if you could comment on any aspect of this would have. we have had legislation to put standards in place. if the resources are not there at the end of the day, it is difficult to maintain -- to maintain standards. could you talk about anything that would deal with the safety?
>> sure, safety is always been number one priority of continental airlines. it will be as such as well. this has happened to all of us in the industry this merger will not affect safety. safety is important before the merger and it will be important after the merger. this is something that someone would rather have. no matter what level of profitability or loss, we are always focused on safety because that is the most important thing in the aviation business. >> congressman, let me add what
jeff said. regardless of how few dollars there may be, gore won always goes to safety. -- dollar number one always goes to safety. i do nothing that anybody in the room would conclude that an economically fragile and systemically unprofitable industry is a benefit to safety. that cannot be good. there is no way that anybody could suggest that that is a good thing for safety and security. the more economically robust that the new company can be, the more resources we can dedicate to everything that is important to all of our constituents including safety. we have a relationship with our regional carrier -- regional carriers.
we share best practices and we conduct safety audits and we hold them to a high standard to revalue the fact that they appreciate that we have available to them and united a standard of safety that is a benefit to them. we're in a position to be able to do that and we will do that even more so as a new company. >> one other question. this is a global industry for major carriers. we face a a very -- we face a very robust industry because of government support of. could you discuss how we can pretend -- what can we do to
know how this will affect our international possibilities for competitiveness? i know that we have alliances with international competitors, but we do not want those to end up being international takeovers. we would like to see global competition. >> we could not agree with you more. as jeff said in his testimony, the majority of our competition across the a atlantic and pacific our foreign carriers. we face competitors who have usurped positions of network carriers in this company to become the no. 1 and no. 2 carriers in global markets. we have already gone through a significant consolidation. we now have iberia. we have to have the same economic robustness that they have to be able to offer a
competitive response to the consolidation that has taken place across the pacific and the atlantic and in latin america. we believe that the company will give us the opportunity to do that. >> congressman, that is correct. this is a global business and we need a global scope and a global scale in order to a effectively compete. what we are finding is that large carriers offer a greater scope and a greater scale than we do and they are picking off our passengers one by one, in particular our business passengers. where we make our money is in our business travelers. we orient our product and service towards that. these large foreign carriers are
being very successful in taking our passengers. by combining, we will be in a position to compete effectively with them and to continue to compete in the united states against the robust competition that we find ourselves with today. >> we now recognize the gentle lady from texas, ms. johnson. >> thank you, very much, mr. chairman. i have not taken a position on this merger. i have been concerned about what most passengers are concerned about. that is employees. in your joint testimony, you state that there will be access to 16 domestic destinations and that small communities will
continue to be served. my question is, who will be serving these communities and do you intend to subcontract out smaller communities? i would like to have both of you comment on that. >> let me address that. this will be very good for our employees. it will provide them with good jobs. careers, and not just jobs. it will provide us with the synergies that will permit us to continue to invest in our employees and i have made it very clear that the wealth creation -- i intend to share that with all groups. in terms of service to communities, we allocate the aircraft that we have with the larger jets, depending on the
demand of the routes and for smaller markets, we often use a regional affiliates that we contract with because those routes cannot bear a large aircraft, but rather a 50 seat aircraft. what matters the most is the air service. those regional carriers have employees as well. our own employees will benefit with this merger. >> so, as the congressman said, the reason that the low cost carriers do not serve those that we spoke to, they do not have access ability to the aircraft that we mentioned. 737 will not be flying to north
dakota to pick up passengers and connect into denver, but our 50 seat regional jets will and that is how we will get on to wherever they will be flying. that is the way the networks work. the low cost carriers will not offer service to those communities if we were not in a position to economically do so. >> thank you. i am much more familiar with continental and united. you have built a reputation of having a culture that is very supportive for passengers and the employees seem to be very quite pleased and happy. when you combine the pilots and
complete these mergers, what would be your position on the pilots of authority? with a come together prior or how do you plan to -- airline >> congresswoman, i was probably doing something else at the time. as jeff said, our pilot leadership is one to be given the opportunity to speak to their views of this combination and what they see as a benefit of the two group's, although it has been a relatively short period of time, there has been a good deal of opportunity to come together to discuss ambitions for the combining of the work groups and i have to say on
behalf of jeff and myself that they have done a very good bit of work in a very short period of time. i know that they will share that with you when they come up here next. and that is made easier by the fact that they are represented by the same union. across the spectrum of our work groups, the two companies have separate unions for flight attendants and mechanics. the first order of business is to have a determination of which union is going to ultimately represent those professions in the new company, because the workers will have to decide. they will have to choose between the different unions. that is going to have to be sorted out. the pilot group is not going to have to attend to that because they are represented by the same union. >> thank you.
i am basically a passenger. like a majority of the american people, when i get on an airline, i want to be sure that the pilots are happy and healthy and the attendants are happy and healthy and that the plane has been serviced appropriately. where do you get those planes service and maintain? >> congresswoman, you and me both. we're most interested in safety. our aircraft are serviced by a combination of our own employees and outside contractors to rid we used g e, we used rolls royce, we used goodrich. we use and number of very professional companies. we are focused on maintenance for safety and maintenance for dispatch reliability as well. making sure that there is not a
problem and the aircraft gets off on time because we are network business and those flights connect. we share the same desire and we are very focused on what you have pointed out. >> so, across the united states, our line maintenance organization is represented by the unabomber -- by the brotherhood of teamsters and we have a large base in san francisco. we are also represented by that labor union. as jeff said, we have amendments partners worldwide and as jeff has also said, we are a global carrier. -- we have many partners worldwide and as jeff has also said, we are a global carrier. >> do we coach -- codeshare across the world? >> yes we did. -- as we do.
>> you said there were probably not be any changes on the front line employees. what about the back line? >> what you refer to are the headquarters. in any merger, there are efficiencies as a result of job redundancy is in headquarters jobs. we will have the typical efficiencies of any merger would you have two headquarters doing the same job. there will be reductions in jobs in houston and chicago. there will be jobs that will move from houston to chicago and there will be jobs that remain in houston, but the vast majority of jobs will remain as there are today because we are such complementary carriers and we have such very little overlap. the front line employees are not really affected. the precise number is not known
at this time because we are in the early process. that will be a relatively small number. >> will you use retirement? how will you handle the people that you have to cut? >> we always prefer, if we have employees that retire or voluntary programs, and also for the police whose jobs are affected, we will assist them in finding other jobs through a job fair system. >> thank you very much. >> i will now recognize the gentleman from new jersey. >> thank you mr. chairman for holding this meeting. i think the witnesses for joining us. i want to say that i support this merger in the strongest possible terms. once my colleagues review all
the facts and the situation, they will agree with me. this will create a much stronger airline and will help them survive in the economy. it will enable dramatically needed new investment in products and services and result in much more efficient flight operations. that is something that i do not think that anyone can dispute and it is something that we all want to see. it will vastly improve passenger convenience. i think the to of you have -- i think that the two of you have done this very well. with little overlap, there should only be a negligible impact on this as you have said. the merger will have a tremendous benefit in my state and i think that that is great.
to effectively compete against a large combined european carrier. if this merger were not to take place, what are those implications for you? >> congressman, we are very proud of the carrier that we of created at continental. our culture has permitted us to work together and provide great customer service and a great product for our customers. however, we are simply too small to compete on the global stage. we are finding greater and greater difficulty.
we are facing increasing competition abroad with powerful foreign competitors. we are sometimes subsidized by governments. we are profitable and we can invest in their products and services without usurping our own. it is important for us to merge with united and put ourselves in a position to compete effectively on the global stage. i think we have done a very good job. we are eking out a hand to mouth existence and that is not a future that i want for my employees and it is not a future that i want for my customers. it is not a future that i want for the communities that we serve and it is not a future that i want for aviation in the united states. >> thank you for that answer. in closing, mr. chairman, i
think it is right to be asking all the tough questions of the committee members, but i think that if we have blinders on and are short-sighted about the opportunity that we have here to create a stronger company, protecting jobs, protecting safety, keeping jobs here, that some future aviation subcommittee will come back in the future and look at my united and continental, if the merger were decline, had to witness some great demise. i do not think that is a understatement -- that is an understatement. i thank you for being here. i urge my colleagues to look at the positive effects that this merger would create. >> thank you, mr. chairman. i have a contrasting view. it the purpose of the
deregulation act of 1978, and i was in this room where it was voted on, it was not to consolidate aviation, but to expand competition and to take government out of the business of the turning rates and market entry. in the first five years after deregulation, there were 22 new entries in competition. by the end of eight years, there were only five of those left. 12 years later, there is only one. it has been absorbed by u.s. airways. what we saw just recently was a further step in that consolidation when the previous justice department looked the other way and brushed aside my
objections that the approval would result in a cascade of mergers. that happened. you did not object to delta/northwest because you were waiting in line with your own hat in hand. the third will be american airlines and a domestic partner and the result will be three global medicare's that will dominate the world airways for the will be little choice for passengers and little choice for competition you will concentrate on long-haul services as you have said. the networks of united and continental overlap on 13
routes in the largest markets. these carriers compete in a number of markets. the justice department expressed its concern over reduction in competition. last year, you applied for antitrust measures. the justice department comments on the application continued that fares are likely to continue. competition will be significantly continue. this could be the only service alternative.
the purpose of the regulation was not to have anything but competition to what has happened is that there is avoidance of competition. he said it earlier in your testimony that there was too much capacity in this market. you guys hate competition. you want to be the competitor that dominates the market. each one of you, not just you. northwest, delta, american, all the rest. i have seen it through all the years of deregulation. this is a blow at small-market service. it will result in increase in fares and cost and for the purpose of the regulation, it is not to line the pockets of the
big carriers, but to give americans more choices, lower- cost, more opportunities and what we have seen with consolidation in the airline business is less of everything. less competition, higher fares, less service, $4 million played in baggage fair last year. for goodness sakes. this is a terrible injustice to the purpose of the deregulation act and i will continue to vigorously oppose it. >> thank you, i think you for your comments and remarks. i think he has made his position very clear. the chair now recognizes the gentleman from north carolina.
>> thank you, my question is how this merger will affect airports that have seen a decrease in passenger service as a result of the current dismal economy. if approved, will this merger provide an opportunity for communities such as the one that i represent to attract additional service? >> as we both said, we serve 130 small communities. both of us are always mindful of opportunities. very recently, we have commenced service to small communities.
we are finding that these markets are vigorous as well. you will find yourself opportunity. >> you concur, i presume? >> i do. we've respond to market demand, but markets in all communities are better service by healthy carriers that have a future than carriers that are eking out a hand to mouth existence. >> thank you. as the development of the three international airlines global
alliances over the past 15 years had a positive or negative impact on competition, pricing and customer service? is it your opinion -- let me ask you a different way. our three alliances sufficient to ensure future competition? >> as one of the founding members of the alliance, i think that the alliance has served the purpose of giving consumers a real opportunity to fly across the globe with a woeful of individuals. united can be your entry into the star alliance. the business person can make a journey across the world and travel on to three of our
partner carriers. i think that has been great for business. i think that it has been good for consumers. whether or not there are going to be three is a very dynamic market and we see this as constantly changing. what we have seen recently is that it is a decision made by continental to actually except an invitation from united to depart and alliance for continental is perceived to be a small participant in that alliance and come to the star alliance. two years ago, we made that invitation to continental and they accepted the invitation and came into the star alliance. >> do you concur?
>> i do. the alliance has been very good for my business. it can be highly beneficial. we recently announced a nonstop service from houston to aukland and new zealand. we did that in a couple contexts. we're going into a a hub where we compete with new zealand. this gave us the confidence to launch that route which will be on a new 77 boeing aircraft. >> -- a new 787 boeing aircraft.
>> i yield back in and thank you for being with us, a showman. >> the chairman now recognizes the gentleman from hawaii. >> this committee is concerned about the impact of this merger on employees, customers and competition and on the issue of competition is the department of justice that has the major responsibility to determine an analysis. how long do you think the time will be regarding your merger? >> we expect a very professional organization. we are being responsive to their requests for permission.
>> considering this will be one of the largest mergers ever, if congress came in and requested an exemption, the department of justice have concerns about that, do you have any concern about approving this kind of a large merger? >> congressman, i cannot speak to the department of justice whose thought process with regard to our application, i would say that we recognize that joint ventures may have revenue benefits and cost savings, but not the efficiencies of the merger. therefore, i would imagine that
the concern had to do with the difference between the joint venture and a merger which would have consumer benefits. >> when continental came men for their exemptions, the testimony was -- came in for their exemptions, the customer c- span.org was that was your testimony only a year ago. what changed? he suddenly said that all of these risks aren't there. >> no man, the risk is there. it is there without question. the joint venture has been very good for continental.
it has been necessary, but not sufficient. we have continued to lose money and we continue to be in a position of being concerned about our future. the merger will add to the expense. there is nothing in the merger on fare increases, but it creates a network. this optimizes our fleets across the hubs that we will have. and the merger would return to profitability. last year, we lost $282 million having lost more before that. that is not a future i want for my co-workers. >> i appreciate the fact that
you have testified on the benefits of this kind of merger. i would like to ask the chair for permission to submit for the record these letters from hawaii that support this merger, including one from the governor of the state of hawaii. >> without objection. >> i have not made a decision regarding this merger. i expect that the department of justice will be very vigilant in this analysis. i am reading this and they pose a very interesting possibility and that is that this holds hearings on the merger. there were various kinds of positive impacts. we are not sure if these impacts have been realized. they say that we should have
such hearings and hold off on going forward with this merger or supporting this merger until we can find out what it results and. do you have any -- of what it results in to request you have any comments? >> any transaction that you consider, it is considered in a particular time and place and in a particular economic reality of the moment. if you think about the concern over all the members that have asked us about the effect here about the proposal that we make that would bring some measure of economic stability to the new company, as the new company has to confront the extraordinary economic shocks that this
industry has had to confront either opposed deregulation or post not 11, making a commitment in the context of an environment that is certain to change within 30 days of making any such commitment is a challenging proposition. we are saying that competition it -- this combination will be positive for consumers. it will be positive for communities. it will be positive for employees did it will be positive for shareholders. o we cannot tell you is what the next unexpected event might be and what the next economic shot might be and how our companies or a new company might respond to that. in making a representation here, you would have to go over
and say are asked what changed. >> i know that my time is up, but as to that, we realize that circumstances change and that is why you were reassuring as that everything will be positive if the circumstances change. i think that is where our concerns rise. >> we will be able to better do that than we otherwise would. >> the chair now recognizes the to to and from tennessee, mr. duncan. >> thank you mr. chairman and thank you for calling this hearing. i am sorry that i did not get to hear -- did not get here earlier. i was in another committee. i think almost everyone agrees that the country would be better off with more airlines instead of fewer. on the other hand, if the refusal to grant this merger is
going to result in one or both of these airlines going out of business, then that would certainly not be a good thing either. i have these concerns. i have these briefing papers and one is one that could create an increase in fares the minority briefing says that the department of justice is more reason with empirical data. where i am from, in knoxville, we have more airlines that any
city close to our sons. but we do not have any low cost carriers. we get some extremely high prices, particularly on the flights from washington to -- from knoxville to washington. when i chaired the subcommittee, we had a hearing in wichita and the staff told me that it cost them $1,000 to find $1,000 to fly from knoxville to which atoll in coach. there was an advertisement that advertised a trip to spain for $300. people had a hard time understanding all of these fares. i just wonder, maybe you have already given some assurances about these fairs, but i would like to see what you say about
the lack of competition in some of these smaller cities. several years ago, i was told that each one penny increase in jet fuel or aviation fuel cost to weather million dollars. -- cost $200 million. i was wondering if you have given that any consideration. what affect would a doubling of jet fuel or aviation fuel have won your companies? >> that is a rather more like our question. i will take the back end. the dramatic escalation in the price of fuel would likely
eliminate the prospect of the industry this year. it is advertised and we agree that we are seeing the return of business passengers. it would have an affect on overall gdp. this will actually help the survive. that would be a bad thing. your respective of my book, where we have tried to lock in a prize, this is a high price this is not an inexpensive.
one way of thinking about that is that those bags that we have seen, 50 pounds apiece could have you consume a lot of jet fuel. this is debatable. >> we spend more on fuel than we do on our employees worldwide, airplanes worldwide, and our facilities worldwide. jet fuel would be devastating. as to pricing, let me be clear that this merger is not predicated on fare increases. the merger is not predicated on passenger reductions. this is a competitive industry
in the united states where low cost carriers have continued to grow. airfares have dropped 30% in the past decade. we have lost over $1 billion since 9/11. we are currently charging amounts that are clearly below our cost. whinney to change the business mix. we do pay a higher price because they are consuming inventory that we hold open until the very last moment and we run the risk of that inventory spoiling which is to take off without someone in the seat. and we as a company take risk.
i can assure you that this is a very competitive business. we do not have a single market in the united states where we overlap. there is not a single market where the number of competitors is reduced to just one. that is not going to occur. >> there is not an easy business out there. this has to be one of the most difficult in the world. the natural resource problem and the weather problems and so forth. >> thank you, mr. duncan. the chair will now recognize himself for five minutes. as the only member of this committee, we are working to improve the region.
since chicago is the transportation hub for the nation, what is good for chicago is good for the nation. i believe that this merger will benefit the chicago region. in addition, it has the potential to be good for the o'hare airport in the o'hare modernization program. it is definitely good for our nation's air traffic. however, there are a number of critical issues that need to be examined. we would see how the impact wouldn't affect service. we have gone through the issue and i am sure that we will hear more about that and we have spoken about that in your
testimony. we also need to look at the impact that the merger would have on jobs, especially with respect to job loss. finally, we also need to make sure that there is a commitment by at the new united airlines to increase capacity. right now, it would most critically provide runaways and reduce by 75% at o'hare. two runways have already been completed and one run the project is currently being worked on and there are more projects that remain to be done. i want to ask mr. tilton, are
you committed if this goes through, or are you committed in general to move in this critical program forward, specifically with respect to the three remaining projects at o'hare? >> we have been supporters from the beginning. the modernization and expansion of o'hare, we have been supporters of the runway development. it goes significantly to something that just mentioned in his remarks, that we have been for quite some time the number one on-time network carrier in the united states. much of bass has been able by the modernization -- much of this has been enabled by the modernization of o'hare and the facilities that we think are no
longer necessary. those are terminal facilities and the expansion of terminal facilities in the current economy, but as you also know, we are at the table negotiating those issues with the mayor and i think that those discussions are to be constructive and good for chicago and good for all here. . .
>> united bankruptcy, not the employees paid a high price and that for allowing united to continue to operate. i want to focus specifically on pensions, because i understand, and this has been touched on a little bit already, that defined benefit plans -- that the fine benefit plans could no longer exist at the net it airlines after its bankruptcy. continental do have defined benefit plans. there will be problems with putting all of the employees together in a merged airline. will it be possible for the continental employees to keep
their plan, or is this forbidden by the bankruptcy settlement? >> congressman, let me speak to that. yes, continental's defined benefit plan will continue after the merger, and we have received confirmation to that effect. as we go forward, as we negotiate joint collective bargaining agreements with each of our units, we will obviously be discussing a broad range of wage and benefit items, including the amount of pensions. those defined benefit plans could change. for example, our own pilots union could be determined to freeze that plan and go to a defined contribution plan which we have been funding since that was negotiated. last year, we at continental lost $282 million, but
nonetheless put $283 million into the employee retirement plans. >> does this mean there is a possibility that united, if the merger goes through, former united and former continental employees now in the merged airline will have different pension plans? i just want to get a better understanding. >> if you think about it, we were saying earlier, our employees have a multi employer plan, supported by iam. it was a product of the negotiations during the bankruptcy. it represents employees at both companies. how the employees choose to be represented in the course of
their representation choices will determine whether or not more or fewer employees are given the opportunity to be beneficiaries of that plan. but that is a function at the end of the day of which union represents. which union represents which employees at the end of the decisions made by the employees on that matter. it so there are significant differences across the employee groups. the process will be made it transparent to the employees when they make their selections. >> i certainly believe as we move forward with this consideration of the merger that this will be a critical piece of it. if there are more things is possible that can be worked out with the employees, the better off we will be and i think the
greater likelihood of the merger moving forward, but that is something we have to continue to keep our eye on. with that, the chair will now recognize the gentleman from arkansas -- he is not there. i believe we will go back over to the democratic side here. the chair will recognize -- will recognize the chair of the surface subcommittee. >> thank you, mr. chairman. gentlemen, i will read a couple quick statements and you tell me how this merger -- i think it is a reaction to this, but how it will solve this problem. "i must concede the industry has more chronic susceptibility to cry -- to competition then i would concede or predict."
then the former american airlines ceo, "market-based approaches alone have not and will not produce the aviation system our country needs and that some form of government intervention is required." i think you're merger reflects that. will this solve the problem once and for all of this industry? >> congressmen, i am not sure it will solve all the ills of the aviation industry. what we are trying to do is create an entity that can be profitable, that can withstand the external shock, that can offer a future and some stability to our employees, that can reverse the trend of the employment loss that this industry has suffered, particularly since 9/11. >> ok, i have several other
questions. >> congressmen, i don't think the merger will be able to resolve any of the structural issues because of cutthroat competition, such as the absence of a. -- apparent. entry -- apparent barriers to entry that allows businesses to comment and fell out and destroy a tremendous value. they destroy value cleverly, employee value, shareholder value, and community value because they come and go. >> there must be something in the statements, some form of government intervention might be required. which gets to my further point, which is you said safety would not be affected. actually, i did not take that as positively as you might think. i would hope it would be. i would reference both of your
chief master executive councils, when they're talking about passengers do not want air travelers provided by the lowest bidder. they want and deserve safe and reliable transportation provided by the network carrier of their choice. that was captain j. pearce. when a passenger buys a ticket from united airlines, they deserve a united pilot at the controls. this could and management's preoccupation with outsourcing that. will this merger lead to any reduction and outsourcing, or any improvement in who you contract? >> we do not perceive at united that the regional carriers are partners. the entry-level into the industry for co-workers are employees outsourced. united is not going to fly a
large plane to north dakota. >> we are paying $18,000, $20,000 per year with a lot and not ours to be a pilot. we're trying to do that through intervention. you are being pulled down by people who you may well require higher standards. >> as i said, and you are in a hurry, but we spend a lot of time talking to our regional partners about the very thing you talked about, and that is taking our safety practices, sharing them with them, and expecting them to abide by them. >> would we see perhaps we would not go to the lowest bidder for outsourcing and the future, would require a higher standard? do we have to wait for legislation that requires more hours and experience, etc.? >> we support all improvements in safety. safety is incredibly important, as you know. the weber, the combined carrier will not be flying mainline
aircraft into small airports. that service will always be provided by third parties. >> you could operate a subsidiary that provided that service, or you can -- there are different levels. >> sure, i appreciate that, but our practice at continental and united and practice at the combined carrier will be used third parties to do that, but we are very committed to safety for ourselves, for our regional carriers, and we, like united, share best practices with them. >> i am out of time, but i just want to say i think there are a lot of people out there trying to run airlines well and safely and respect their employees, but we have seen is this pattern of destructive competition. it may be a transient and trebek goes away, or maybe other people who persevere longer but drag down the standards. i think the industry should hold
the support setting a much higher floor that everybody has to meet and there is no competitive advantage among any of the industry for any level of service out there. i hope you both support that. thank you, mr. chairman. >> thank you. congressmen boswell has been called away, but he wanted me to express a serious concern that contractual arrangements with pilots and other labor group be worked out in fairness and completely fulfilled. at this point, the chair will recognize the gentleman from ohio. >> thank you, mr. chairman. thank you, gentlemen, for your testimony. while i may not be as long in the tooth as some of these members of the committee who have experienced deregulation, i know from my experience in the state legislature and pass airline mergers, it has not gone
well and ohio. dayton, columbus, wilmington, cincinnati have all experienced significant service and job loss and a movement to complete outsourcing of these jobs. i remain concerned, while not taking position on this, remain concerned this business model that is being proposed would put added strain on the cleveland, especially after so many taxpayer dollars have been funded to expand the facility, as well as corporate investment. but i remain concerned about that. i want to just hone in on one thing. i am really concerned, and i have not been convinced by the testimony thus far, that by reducing the number of competitors currently that we will increase competition. we may be setting up a scenario of too big to fail. can you briefly comment? >> certainly, i think we are
creating a carrier not too big to fail, but big enough to succeed. we compete on a global scale. we compete with large foreign airlines. we compete with large domestic airlines, like delta or american. we're putting ourselves in at a position with this merger to successfully compete. i do not believe that competition is reduced by this merger because this is a brutally competitive industry as it is. it is today, it will be after this merger. there are essentially no barriers to entry. there are high barriers to exit. this industry does not earn anything on its invested capital. which is billions of dollars. >> can you name one at legacy carrier outside of bankruptcy that has emerged where they have actually produced more cost, lower operating cost, and have not had a significant reduction? >> let me speak on what delta
air lines, and we will leave the capacity reduction aside at the moment, because i believe that was caused by the global recession, not the merger, you need to speak to delta about that. but they have been on the public record saying they believed the synergy of the merger will be approximately double what they anticipated. it that gives me great hope at continental. i'm not saying will be up to deliver that, but so far what they're claiming publicly is their merger has been very successful, both in cost efficiencies and revenue generation. >> there is testimony here, united on public statement and knowledge of the merger will not reduce cost verses low-cost carrier or more efficiently as the carriers, and the industry has financial problems, but there will not be solved by suspending antitrust laws. so business strategies that have moved into obsolescence can
exercise artificial market power. again, suggesting the costs are not going to be reduced and this will put added strain on you to cut corners down the line. >> it is sort of contradictory. we have already established there are going to be the elimination of overhead redundancies that are clearly going to reduce cost. on the one hand you have a question as to are you want to be sympathetic to the concerns of employees whose jobs will be eliminated because there will only be one headquarters. on the other hand, there's a stigma that says it will be sufficient with cost reduction. whether or not the model is absolute, obsolete and redundant has yet to be established. greeting a company that will have the club structure that we have and the ability to optimize the hub structure to
newark and houston and washington and denver and san francisco and los angeles to connect small communities in to those clubs is really the premise upon which we think we will succeed. but if somebody thinks the business model has failed, actually does not go to the point of the proposition of the merger. >> the big money is where international carriers are coming back from. more specifically, to the point, we talked about outsourcing jobs and the safety, that is a big issue for me. after having lived through testimony with a crash or the pilot, under the ntsb after action report, showed they were not even trained in their own safety equipment that the airplane was required to have for saving the day. right now, we have 1400 pilots furloughed by united, but you are flying routes from washington, d.c., to spain with3 can you guarantee me those
pilots are trained, educated, and have the same experience level as well as the other air crew members aboard the aircraft that our own domestic air carriers have? >> that relationship with airline this is analogous to are offering our code with aer lingus and telling a passenger you can book on united but you will fly on to their airline or regan book on united, sir, and you will fly on lufthansa or usair. that it is a function of the reciprocal agreements the industry has, where we share m etal. it is part of our joint venture. we share that. i take for a given that my aer lingus partner is as committed to safety as i am and it is a
relationship that is some biotic between us. it >> i am glad to share that but i don't know if i share that. >> but think of the relationships we have across the business, where all of that code a shared. >> i am ok with that, but if u.s. customers if they prefer an american pilot verses and international pilot flying from the net states to europe, because when you're flying back those are mainly american pilots, correct? >> no, sir, lufthansa is german pilots, british airways is british pilots. >> are aer lingus pilots united pilots? >> no. >> ok, that is my point. >> we now recommended the gentleman from california. -- we now recognize the gentleman from california. >> let me congratulate you on a new way to describe job losses,
synergy. very unique. you ought to be congratulated. i have some questions specific to safety. the san francisco maintenance facility was discussed earlier today. it is my understanding that you are at united moving jobs away from that facility to china, singapore, and the philippines, is that correct? >> we have long had it -- >> no, directly into this. are you moving jobs out of san francisco to foreign companies format this purpose? >> we have oversees maintenance facilities that do maintenance work and have quite some time. >> you did not answer my question. please do so. >> there are no plans to move any further jobs out of san francisco, if that is your question. >> are you moving jobs out of san francisco to foreign
facilities, yes or no? >> no, we're not moving jobs out of san francisco to four facilities. >> did you do so yesterday? >> we have a maintenance facility in beijing that is the maintenance facility for the triple seven fleet. that is a joint venture between lufthansa and air china. >> does the faa regularly inspect that facility? >> that is the faa's responsibility. >> that is not the answer. >> that is a question better posed to the faa. am i pose it to you because it is your responsibility. >> the faa fulfills its responsibility with respect to such facilities, yes. >> you must be aware of earlier testimony before the subcommittee the fda does -- the faa does not regularly inspect to the same degree. am i am not aware of that testimony. >> we will get it for you. >> i appreciate that.
>> with regard to the question of continued outsourcing, the question about pilots was asked. i want to follow up. our foreign pilots in the left and right seats of united airlines jets? -- are foreign pilots in the left and rights of united airlines jets? any for pilots? >> what are your plans? >> yes. >> no. >> thank you. could you describe the personal benefits the two of you would receive as a result of this merger, golden parachutes and the like. >> i know how i have made the decision already, i dunno if jeff cavs, that anything i receive will be converted into shares of the new company and deferred until such time as i eventually retire from my board seat. >> the estimated value of that? >> it depends on how successful
the new company is and whether it is form. >> i would like specific information and i would not have to like to receive that from sec filings, so he could deliver it personally. >> we will do so. i have already filed. >> think. the new will be able to deliver it to me. -- thank you. then you'll be able to deliver it to me. >> my compensation is set by independent directors. my arrangements regarding ceo of united have not yet been negotiated. that is a process that will go through both continental's human-resources committee and the compensation committee of united airlines. the amount of compensation will receive has not been determined. >> what is your present compensation? >> i received no salary whatsoever, sir. i have waived that until continental is profitable. i am also not eligible for a bonus because of my salary. >> stock options? >> i have no stock options, sir.
>> you are not receiving any benefits? >> i participate in a long-term performance program, the payout of which is dependent upon the amount of profit sharing we share with employees as well as the stock price. >> thank you very much. thank you very much, mr. chairman. >> thank you to the gentlemen. i would ask any members present if they have additional questions? >> thank you. at one follow-up question that came to mind. you had suggested that aer lingus pilots are trained as well as domestic aircraft commanders, pilots, and captains on board our aircraft. how can you make that assumption when your own regional carriers are not turning to the same level as legacy carriers?
we found this in constant ntsb reports. it was found them over and over again. explain to me how you draw that connection with your own regional carriers cannot commit to the same level of experience that you have been training pilots? >> back to the relationship between the network carriers and our regional partners. as i have said, and jeff has echoed, our safety management organization works together with our regional partner management organization to ensure that the safety process these -- processes that we hold the best practice with at united carriers. we all did them and we all that them together with the faa. we share information with iraq faa relative to our work with the regional carriers.
we are mindful of the risks associated with new anything, new employees of any type. we are mindful of that. we understand that. as jeff said a moment ago, they are necessary. there are important. just bear with me for a second. with respect to our relationship with all of our foreign partners, you have to think about all of them. air nipon, air china, singapore air, lufthansa, british midland. austrian air, all the carriers with whom we share code across the entire star alliance, we either from the global association of carriers perspective, all of the safety authorities that exist in all of those countries, we have to set a safety standard for the entire
industry worldwide, regardless of the nationality of the pilots. that is the essence of the reliance -- of the alliance structure. we will fly a passenger across four or five carriers. we know we are making an implied commitment to the training of all of those carriers, which is why, congressman, to get into the star alliance or into a code-sharing agreement, you have to be approved across a spectrum of safety considerations before you are approved. >> the after action reports from ntsb with the colgan showed the regional air carrier in part of their syllabus did not teach the pilots how to recover from a full stahl, almost all recognition through the stick shaker, not a stick pusher. it was not part of their training syllabus.
when asked, they said it was not part of the faa requirements. what we have seen, colgan said it was not part of the faa, what we have seen is now where airlines have reached for the stars in terms of training, they are now reaching for the minimums with regional carriers. i have grown very concerned about this over my term on this committee. i want you to say to this committee and for the record that you know that those aircraft that are flying out of washington, d.c., while we have 1400 grounded pilots in your airline, trained, you know for certain they are trained to recover from rifle stall. >> all of our carriers with whom we do business are trained to a level that is satisfactory to both the faa, to ourselves, to ourselves, and to their respective safety jurisdictions. >> was colgan air training to your satisfaction? >> no, it was not.
>> why did you keep them as one of your carriers? >> we were not aware of that training efficiency. that is the responsibility of the faa. we expect all of our regional carriers -- >> that is your responsibility. >> let me tell you we are very concerned with safety. we did not train those pilots. it we did not maintain this aircraft. we did not operate the aircraft. we expected to be safe, we expect the faa to do their job, we expect -- >> we expect you to do your job, too, sir, and we need to make sure your domestic carriers and the international agreements you'll be making, outsourcing jobs and training, all the other stuff, which will move this type of level of expertise off the coast, it needs to be maintained. i cannot sit here and a guarantee as a representative of the people of ohio who fly on your airline or other airline's
to be certain that this level of training will be maintained if we are getting into these big agreements, too big to fail, with other international carriers. >> we are very focused on safety. the training of pilots across the globe is a responsibility to great for continental airlines. we did not have the resources. each jurisdiction has its federal regulators, regulations over safety. we participate and share our best practices. but if you look at star line's pixar alliance, it has orders requirements for joining and safety, and i'm confident in the safety of all the star alliance carriers. what you point to is a problem, no question, and everybody in the aviation business and everyone at continental regrets that training failure at colgan. that has been identified and will be i am confident corrected, and we need to make sure we all share the safety
concern. it is the most important thing we have. but we cannot possibly be responsible with the limited resources we have for the safety of every carrier on the globe. we can be responsible for our own safety. we share best practices, and we do so, and we support all improvements in pilot training and we support regulatory reform within the faa if that is what is required for oversight for u.s. carriers. >> we will get that. will make sure is mandatory for pilots that they know how to recover from a full stall. am i would support that. support that. >> that is the reason why we passed legislation through both the committee and out of the house. when we come out of conference, we will have a reauthorization bill that has airline safety and pilot improvement act, which will of course raise the standards for pilot at the
regional carriers as well. we recognize at both united and continental and some of the other major carriers that they do not have a lower standard, even though they can, but many of the regionals do. that is what we have found with colgan and other regional carriers. i would just interject as well, and agree with a gentle man, while it is the f a's responsibility, it is also your responsibility as ceos of airlines that contract with regional carriers to make certain, not just rely on the faa, but make certain that these regional carriers are hiring pilots that have trading in excess of the minimum requirements as opposed to the minimum, even after we increase the minimum requirements in the conference report. with that, the gentleman from california, mr. garamendi? >> thank you, and thank you for
bringing up that last point. you bring me -- you give me an opportunity to cool down a little bit. i have heard the most astounding testimony, that the chief executive officer at an airline that contracts for services to provide services to the airline, in this case continental, and i did not hear this from united and i am pleased, that is not your responsibility to ascertain the safety of the pilots with a new contract. >> sir, i did not say that. am i am delighted that you did not say that, could you specifically tell me what your responsibilities are with regard to the qualifications are of those who contract with? >> we do expect, we do require all of our regional carriers to be safe carriers. colgan in this instance had a training failure that resulted in a terrible accident, which we
regret tremendously. we are as focused on safety as you are, sir. we expect safety, we require safety. you have to understand, however, there are limitations on the resources. since all airlines contract with a large number of other airlines, we rely on the requirements and safety audits of the industry, the faa. we have our own safety audits. the safety audits that the star alliance conducts. >> i am particularly concerned about the domestic situation, because that is where the accident occurred. i like to have you specifically in writing present to the committee exactly what you and united could do to ascertain the quality and the safety record and training record of those pilots with whom you contract in
your hub and spoke situation. >> we will do so. we willlgo beyond that and give the congressmen to report of the nature of our best practice transfer, the nature of the relationship between the safety organizations, the regional safety kerry organization and ours, the extent to which we have on occasion found them wanting and suggested that until something was addressed that we would be suspending its contractual service of a particular sort with them. we would be glad to do that. >> that would also include the specific action your airlines take to verify the pilots? >> we will do so. >> we will be glad to that. >> thank you. >> we now read it -- we now recognize the gentleman from michigan. >> thank you, mr. chairman.
before i ask questions, i would just comment on the colgan situation. i read the transcript, and i think beyond the training issue was the issue of the lack of competence of the individuals. it's made me shudder to read the cockpit transcripts and observe the conversation back and forth. they were preoccupied with personal issues and not flying the plane. i think it is not just a matter of training. it is a matter of hiring responsible individuals. i think anyone who reads that transcript would realize that was a good share of the problem. i just want to comment. we have had some other airlines coming together, and i understand all these advantages of airlines combining.
and working together. the many different ways they do that. but i am afraid, what i have seen is there something lost every time we get some airlines going to get there. a very recent case, i won't give specific names, but one airline that i felt was operating very, very well, and everyone in congress is an expert on flying airlines because we do it every week, at in an item, -- ad ininitum, but an airline i thought was operating very well was combining with a large airline that was not operated as well, and now the combination of the two is not operating very well. there are a number of cases. i when i get into specifics. i really caution, make sure you are improving service.
i know it is easy to say, yes, yes, of course, that is our business, that is what we should do. but that is not what happens. i want to warn you about that. i hope you'll give assurances that you will conduct frequent surveys of your frequent fliers and the general public as well. i am just astounded at the number of what i call poor judgments being made by executives who did not even bother to understand the culture of the company they were absorbing, and have lost a very good people and overall lost a lot of good spirit. the public was the worse for it. i am not convinced that all this combining of airlines is that advantageous. that may reduce the cost to the passenger very slightly, it may result in making more money,
which is your goal of course, but i am not sure the overall picture is really that great. i just want to caution you on that, from my perspective, and also give you an opportunity to rebut what i just said. >> what you just said it may present a competitive opportunity for jeff and myself. >> that may well be. i know that continental has had a very good history the last decade of being extremely well- run. you are the c.e.o. that relate renovated it. i fly all the airlines. i am fortunate in michigan we have just about every airline under the sun flying in and out of there. we have a large choice and we exercise that choice, depending on the service we get. you have anything to say? >> sure, you are right, we are well known for our customer
service. i have been a continental since the turn around 15 years ago, part of all the decision making during that 15 years. we're very attuned to customers with corporate advisory boards, for good fliers, we participate and forms. we are very attuned to our customers. that is how we get the reputation for customer service. but largely, congressman, our reputation is built around the culture of continental airlines. we work together very well. we may have disagreements. working together does not necessarily mean saying yes. that means listening to somebody's position, treating each other and customers with dignity and respect, and as a result being honest and open and direct. as a result, we give very good customer service, and i anticipate the combined carrier, with combined cultures, united has very, very good people, the
mandate for delivery to manage operational performance. they have a fine product, creek facility, great people. it will combine that into a culture of dignity and respect. which they have today, which we can bring together, and we can have a carrier that will have a wonderful customer service. the reason i am so confident we can deliver on the synergy is i'm confident in the team that i will build, confident and culture we will have, and confident and the customer service will focus on. >> if you are so great, what are you doing this? >> alone, we are too small. that would compete on a global stage. we are a global carrier, and we need to be big enough to succeed against our large foreign and domestic competitors. >> thank you to the gentleman from michigan. a >> mr. chair, i just want to offer my services to you at some point to go on the airplanes and just as people what they think. >> that would be great.
>> i did this last week. i did not initiate, but somebody else did sitting in the front row. of course, all the people in the first few rows were frequent fliers. he said, this airline used to be good, what happened? >> we appreciate both the competitive opportunity you advised us of and also the author of your services. >> ok, at any rate, to this one individual said, yeah, i agree. pretty soon, the entire first- class section was saying, this has really got lousy. >> that means we have a great competitive opportunity. >> that company has something to worry about. thank you. i yelled back. >> -- i yield back. >> gentlemen, thank you for your testimony today before the subcommittee. with that, we will dismiss this panel and ask the next panel to come forward. thank you.
association. captain j. pearce, executive council airline pilots association. the international president for the association oo flight attendants. the aviation analyst and consultant. mr. william mcgee, and the portfolio manager. ladies and gentlemen, as you know, we will put your entire statement in the record. we ask you summarize your testimony in five minutes, and that will allow both myself and other members to ask questions.
with that, the chair will recognize captain when the morris. capt. morris? >> good morning. i am captain wendy morris, of the air line pilots international. we have more than 7700 laid-off pilots at united airlines and i appreciate the opportunity to speak before the subcommittee regarding the united-cotton is the merger as proposed. -- united-continental merger as proposed. the proposed merger between yet and, still represents not only an opportunity for both airlines
but a possible sea change in the economic direction and customer satisfaction for the airline industry. how the merger is handled will determine whether it has changed for the better. it this choice cannot be more clear. recent history of airline mergers provides a vivid picture of which path to choose. while not -- we're not traveling down hundred territory. the obvious path to success, should be selected, is already been established. the advantage of the knowledge of what has worked and what has not worked must be recognized. the delta-northwest merger, in which the company worked out a mutually satisfactory contract with the pilots, has been a resounding success. it has exceeded initial estimates for financial synergy, leading to a more viable company that provides greater service for the flying public and provides greater employment
certainty for its employees. the america west-u.s. airways merger, in which management failed to negotiate contract terms and advance, is still run as two separate companies. mired in lawsuits, they have failed realize the advertised synergy, even though the merger took place more than five years ago and continues to have its share of unresolved labor issues, which benefits neither the company nor the consumer. at the man stands as the beacon of truth, take care of your -- take care of your employees and they will take care of the customers. it is important day establish a management team not only capable of running the airline will but also that cultivates a culture where the combined entities provide a revenue and capital
generation for great product. in order for this merger to be successful, there must be a joint collective bargaining agreement with assurances for wages, working conditions, and job protection that are commensurate with the professionalism that are pilots exhibit each and every day. thanks to the professionalism, commitment, and financial sacrifice of pilots and other employees, our airline has weathered numerous challenges and now flourishes. but there are still challenges ahead. one of the biggest for the pilots of united and continental and in the airline pilots profession is the industry's continued drive to outsource as much flying as possible to an ever shifting collection of low-cost subcontractors. last year, united airlines placed over 1437 high the experienced jobs outsourced to
low-cost subcontractors. the average united airlines passenger now has a 50/50 chance their flight is being operated by united airlines. this philosophy, which puts profits ahead of safety, and the traveling public, must come to an end. while united airlines has said all the right things on the hill, seeking approval, i speak for the united pilots when i tell you our contributions must be recognized in order for this merger to be successful and the synergy to be realized. we asked that as to consider the benefits this transaction will have for the industry and consumers that you also measure whether managerial actions are consistent with their words. united and continental management stands at the threshold of what could be a great airline, one that sees sustainable profits and will also provide unmatched service to our customers.
the combined united-continental could establish a new measure in aviation where management and labour work together to establish a solid, profitable airline. where employees are properly compensated and where job security is not a constant concern. as key stakeholders, united pilots stand ready to embark on this business opportunity. are favorable participation will lead to a stable, sustainable airline. this will produce an unprecedented level of success for united stakeholders and an exemplary level of service for the flying public. i thank you. >> the chair thanks you, captain, and now recognizes capt. pierce. >> good morning, mr. chairman and ranking members. i am the chairman of the continental airlines master
council of the airline pilots association international. thank you for the opportunity to speak regarding the proposed merger. i am pretty the late tankful you have taken the time to consider -- i am particularly thankful you to the time to consider the effects of this merger. i began my career in the late 1970's in the army and have become -- and became a professional pilot 25 years ago. i am in my second term serving as chairman and as a continental pilot i assure you i've been trying to recover from rifle stall. i tend to think and terms of opportunities, risks, and rewards. i believe this merger will be an exercise in all three. the questions that have to be answered are, where the opportunities produce success, who will assume the risks, and finally, who will reap the rewards. to some, the initial value created by participating in the merger will allow for claims of success. however, if creating a story for
wall street simply through participation is the goal, at bar is set very low. none of us should accept the philosophy of mediocrity as the standard for success. if done correctly, this merger can strengthen our airline and help resurrect a failing industry. this is the opportunity. are merging partner, united's, a financial performance has been in critical condition. although cars has been better, is somewhat anemic. over the last decade, network carriers have reported over $60 billion of net losses. since deregulation, there have been over 100 airline bankruptcies. historical greats such as pan am, t.w.a., and eastern have become extinct. thousands of employees have lost their jobs, shareholder value is in waist, communities have suffered. the industry is broken and is badly in need of an overhaul.
continuing down the well- traveled path of economic irrationality does not bode well for the traveling public, shareholders, or the long-term interests of airline employees. i believe a properly executed a merger can be a better solution for the industry then consolidation by failure. this provides an opportunity to examine what has worked and what has failed. it is clear to see the difference between marginal success and real success can be tied directly to labor, and more specifically pilot labor. in a merger, it is not the executives, bankers, or lawyers who assumed the risk, it is the employees and labor. if we must carry the risk, we must share in the rewards. i cannot guarantee this merger will be successful, but i can with all certainty predicted
downfall if our pilots cannot support the path are managements have chosen. the merger is expected to produce over $1 billion of annual synergy. if the merger is successful, that success will be determined by the strength of the new entity, the value added to shareholders, and more importantly it the pride of the airlines at wilberforce. this pride can only be regained by first returning to labor what has been lost three years of concessions. as a rational as it is to continue to prosper a failing industry, is equally irrational to derive the benefits of a merger to simply in which those who put the deals together or continue to throw good money after bad with ill-conceived business plans that reward only those at the top. it is also important this merger provide benefits for passengers. we should use this opportunity to reexamine subcontracting and outsourcing. when a passenger books a trip with continental from houston to newark and beyond, they have an
expectation that company they purchase the ticket from is responsible for their travel experience. it network carriers should be operational airlines, not ticket agents alone. our passengers have a right to receive one level of service and safety from the beginning of their journey to the final destination. to achieve that single platform experience, flights must be operated under the operational control of the network carrier, and therefore be crewed by pilots under contract with that airline. as continental employees, we bring a high level of service. we bring strong job protection that limits the outsourcing of flying to its lowest bidder. if don enright fashion, this merger can bring the best of continental -- if done in the right fashion, this merger to bring the best of continental.
continental pilots not search out or solicit this merger. we are however cognizant of the fact if done correctly, this could be an opportunity to create a great airline, one in which by continental's culture will be capable of transporting customers almost anywhere in the world and a pilot group unmatched in professionalism and experience. thank you for your time and i look forward to your questions. >> the chair thank you, captain, and now recognizes ms. friend. >> think. it -- thank you. thank you for giving the world's largest flight attendants union opportunity to testify on the merger. the voices of the workers often take a back seat in the hearings and in the public pronouncements of the benefits of airline mergers. i'm here today to give those workers a voice. as a united flight attendant for 43 years and president of the
union 15 years, i have had a unique perspective on the dramatic changes that have reshaped the commercial airline industry and eliminated thousands of jobs. lately, i have listened to airline ceos testified before this congress about the need to consolidate the industry in order to achieve a sustainable business model. after hundreds of airline bankruptcies, thousands of employee furloughs, devastating pay and benefit cuts, destruction of pensions, and 32 years of deregulation, it seems airline management has figured that out. i'll be had in the worst fashion, that our nation needs -- albeit, in the worst fashion, we need a stable industry. the flight attendants and all aviation workers also need a stable industry. the consumers are rightfully concerned airline mergers will lead to higher fares and reduced service. we agree, but we also recognize
the reality that airline fares must increase in order to stabilize this industry, providing robust air transportation system, and provide more stable employment for thousands of aviation workers. to strike this balance between a stable industry and reliable air service, we assert today that the increase and consolidation activity requires appropriate regulatory oversight to protect the interests of employees and consumers. but while some protections are in place today for consumers and communities, since the regulation, there are virtually no protections for airline workers. of all the well-developed, pre- the regulation rules of the provision, only one exists today. a provision that establishes safety -- safe seniority protection in the event of a merger.
after deregulation, congress was concerned that massive post- deregulation restructuring of the airline industry would displace large number of employees. in order to assist laid off employees, they added the airline employee protection program to the deregulation act of 1978. unfortunately, the almost 40,000 employees who lost their jobs in the immediate wake of deregulation never received the benefits that congress promised. since funding was never authorized for the benefits. as congress looks into the impact of mergers on employees, is a desolate look at the failed eep as a framework to provide meaningful protections to workers in the future. as we have testified in the past, we are not supposing to re-regulate the industry, but we think at a minimum, something needs to be done to shield workers from the harshest effects of this merger and all fu